Discount chains outpacing retailers amid bargain trend

A sluggish economic recovery has meant good things for discount retailers.

Discount chains Family Dollar Stores Inc., T.J. Maxx, Ross Dress for Less, and resale/used goods retailers Plato’s Closet and Play It Again Sports, are all adding more stores to metro Atlanta.

Dollar stores and used goods stores have outperformed most other retailers, as consumers have economized during the Great Recession, said Nikoleta Panteva, a retail analyst with IBISWorld Inc., a Santa Monica, Calif.-based market research firm.

That trend, she expects, will continue, even as the economy continues to recover.

“There is no evidence that people are moving away from their budget-conscious mind-set,” Panteva said. “People have become so ingrained in seeking out those bargains and discounts. It’s not a habit that will be broken overnight.”

She expects discounters and used goods stores will see growth into 2012 and beyond.

To capitalize on that expectation, Winmark Corp. (Nasdaq: WINA), which owns the brands Plato’s Closet, Play It Again Sports, Once Upon A Child and Music Go Round, plan to sell several franchise territories in the metro Atlanta market to add about a dozen stores in a mix of the brands in the next few years.

Tucker, Lilburn, Snellville and Douglasville are all on tap to get one or more of the brands, according to Peter First, director of franchise development for Minneapolis-based Winmark.

Play It Again Sports, which sells new and used sporting equipment, and Once Upon A Child, which sells used infant and children’s clothing, will probably represent the bulk of the new stores, he said.

Only one or two Music Go Round stores, which sells used music equipment, will be added to the market, First said.

The down economy has shifted sales for Bill Barney, owner of Play It Again Sports in Buckhead.

“People are turning in big-ticket [exercise] items, but they are not buying them,” he said. “We’ve seen a huge influx of home gyms and ellipticals.”

While consumers may not be spending on sporting goods and equipment for themselves, they are buying it for their children, Barney said. “Exercise equipment used to be our No. 1 category,” he said. “We’ve seen a significant drop-off in that, but we’ve seen an increase in equipment for kids teams sports, especially lacrosse.”

Play It Again Sports sells both new and used sporting goods, and remains competitive with the big-box stores like Dick’s Sporting Goods, Barney said. “People are health-conscious, but they are also very budget-conscious.”

“We’re excited about what is going on with our brands,” First said. “This economy helps our product. Once people find a good value they don’t want to give it up. We have a lot of new shoppers and they continue to come back.”

Stretching a dollar

Both Dollar General and Family Dollar have posted solid same-store sales growth since mid-2008, according to a retail report by Marcus & Millichap.

Leading extreme-value retailers will continue to expand, the report said.

Family Dollar is expected to up its new store openings by 50 percent in fiscal 2011, with 300 new stores.

Dollar General opened 600 stores in 2010 and is expected to maintain a similar pace in the coming years, the report said.

Family Dollar (NYSE: FDO) has opened six new metro Atlanta stores since August 2010, and opened in Austell June 16.

Other area stores expected to open by the end of the year include ones in Lawrenceville, Atlanta, Riverdale, Douglasville, Decatur, Lithonia, Morrow, and Dallas. Two stores each are expected to open in Atlanta and Marietta.

“Atlanta is a huge market for us,” said Josh Braverman, spokesman for the Charlotte, N.C-based discount chain.

More stores are on tap for 2012, he said, but the only one with a signed lease is in Hoschton.

“These are brand-new stores, but this year we are also renovating stores, roughly 800 to 1,000, and metro Atlanta is part of that,” Braverman said.

Family Dollar has roughly 319 stores in Georgia “and that number is going to grow,” he said. “There is still untapped real estate in existing footprints.”

But discounters aren’t the only retailers who have figured out how to lure value-conscious shoppers, said Ray Uttenhove, executive vice president of SRS Real Estate Partners in Atlanta.

“A lot of retailers have figured out how to move into that space and offer more value,” she said. “That’s even true from the full-priced department stores to the retailers that are not classified as discounters.”

Trendy clothing retailers H&M and XXI Forever are expanding in top-tier markets and are not discounters, “but they offer cool, trendy value,” she said.

“Value has become a big deal,” Uttenhove said. “The consumer is trained to look for these opportunities.”